Posted on December 11, 2018
The challenges are significant, but careful planning and implementation can surmount them.
Executive summary
Although ports have adopted automation more slowly than comparable sectors, notably mining and warehousing, the pace is now starting to accelerate. Automated ports are safer than conventional ones. The number of human-related disruptions falls, and performance becomes more predictable. Yet the up-front capital expenditures are quite high, and the operational challenges—a shortage of capabilities, poor data, siloed operations, and difficulty handling exceptions—are very significant. A McKinsey survey indicates that while operating expenses decline, so does productivity, and the returns on invested capital are currently lower than the industry norm.
Nonetheless, successful automated ports show that careful planning and management can surmount these difficulties: operating expenses could fall by 25 to 55 percent and productivity could rise by 10 to 35 percent. And in the long run, these investments will lead the way toward a new paradigm—call it Port 4.0—the shift from asset operator to service orchestrator, part of a larger transition to Industry 4.0, or digitally enabled efficiency gains throughout the world economy. Port 4.0 will generate more value for port operators, suppliers, and customers alike, but that value isn’t proportionally distributed across ports and their ecosystems. Innovative business models and forms of collaboration will be required to realize this vision.
The difficult economics of port automation
The first automated container port was developed in Europe in the early 1990s. Since then, many ports—more than 20 in the past six years—have installed equipment to automate at least some of the processes in their terminals (see sidebar, “What is port automation?”). Almost 40 partly or fully automated ports now do business in various parts of the world, and the best estimates suggest that at least $10 billion has been invested in such projects.1 The momentum will probably accelerate: an additional $10 billion to $15 billion is expected over the next five years.
On the face of it, container ports seem ideal places to automate. The physical environment is structured and predictable. Many activities are repetitive and straightforward. They generate vast amounts of readily collected and processed data.2 Better still, the value from automation includes not only cost savings but also performance and safety gains for ports and the companies that do business there.
Nonetheless, ports are moving more slowly than sectors with comparable complexities (Exhibit 1), in part because the economics of automating them haven’t lived up to expectations. In the mining sector, which is also process driven and asset intensive, some early movers in automation have improved costs and productivity by 20 to 40 percent. In the warehousing business, the improvements have been estimated at 10 to 30 percent. Manufacturers of cars and trucks have also successfully automated complex processes, and some of the equipment they use, such as automated guided vehicles and materials-handling robots, are highly relevant for ports.
Source: McKinsey&Company
